The Los Angeles Dodgers made a significant move by signing fan favorite Tommy Edman to a five-year, $74 million contract extension on Friday. This extension comes at a time when the Dodgers have been known for their trend of offering deferred payouts to players. Shohei Ohtani's deferred contract of $680 million until after his 10th and final season in Los Angeles caught the attention of many. Since then, the Dodgers have also agreed to deferred-money deals with Teoscar Hernandez, Will Smith, and Blake Snell. Many fans enjoy sports without thinking about money, but others analyze contract details during the baseball off-season. Let's take a step back and understand the Dodgers' ownership and the fiduciary responsibility.

Ownership and Investment Expertise

The Dodgers are owned by Guggenheim Baseball Management. Before buying the team, Dodgers Chairman Mark Walter made his money as the CEO of Guggenheim Partners, which is a sprawling enterprise specializing in asset management for insurance companies. In 2012, Guggenheim paid $2.15 billion for the Dodgers. Eight years later, Steve Cohen bought the Mets for $2.4 billion. In March, Forbes estimated the Dodgers' value at $5.45 billion. This shows that a well-funded MLB team was a safe investment in 2012.The Dodgers choose to defer more than $900 million in present-day contract obligations to players who are no longer on their active roster. This is because they can invest the deferred money and end up richer. The Washington Nationals are also capitalizing on deferred payouts, as are other teams like the Boston Red Sox.

Reasons for Deferring Salary

There are several reasons why players defer salary. For one, it allows the Dodgers to have more financial flexibility. Ohtani's motivation for deferring salary was to not limit the Dodgers' front office's financial flexibility. His teams did not reach the postseason in Anaheim, but the Dodgers won the National League West in his first year in Los Angeles and made it to the World Series.Another benefit for players is guaranteed income after their baseball careers end. Bobby Bonilla's agreement with the New York Mets is an example. Players can offer paper proof of future income, making it easier to get loans.

Contract Terms and CBA

The terms of the deferred-money deals for Edman, Snell, and others are more modest. Most major league teams could have accepted similar contracts. There is nothing in the CBA to prevent it, so it's not a "loophole."For those concerned about the Dodgers not being taxed on a $70 million a year valuation over the life of Ohtani's deal, it's important to consider the time-value of money. A $70 million payout in 2024 will not be worth $70 million in 2033 without investment.MLB proposed limiting deferrals in prior CBA negotiations, but the MLBPA declined those limits because it gave players flexibility in negotiations.If fans still have reservations about deferred-money contracts, it's understandable. But there are often things in life that we may not like but have to deal with.